U.S. hospital, insurer stocks drop after Trump ends subsidies

Reuters Staff

2 Min Read

NEW YORK, Oct 13 (Reuters) - Shares of U.S. hospital companies and health insurers fell on Friday after President Donald Trump decided to cut off Obamacare subsidies to health insurance companies for low-income patients in a move that sparked threats of legal action and concern about chaos in insurance markets.

The White House said late Thursday it could no longer lawfully pay the “cost-sharing reduction” subsidies, which were guaranteed to insurers under former President Barack Obama’s 2010 Affordable Care Act to help lower out-of-pocket medical expenses for low-income consumers.

Trump, like most of his fellow Republicans a strong critic of Obamacare, has made the payments each month since taking office in January, even as he attacked them as a “bailout” for insurance companies.

Still, the actual impact of the cuts on U.S. insurers could be muted. They had already factored in the possibility that the Trump administration would stop making the payments when setting next year’s rates for Obamacare plans in many states, said Jeff Jonas, a portfolio manager at Gabelli Funds who focuses on healthcare. Hospital companies could be hit harder.

“We already were expecting (Obamacare) enrollment to be way down last year and therefore, see slightly fewer admissions and more charity care and bad debt. This just reinforces that,” Jonas said.

Insurers and proponents of Obamacare have urged Trump for months to commit to making the payments, which are worth billions of dollars. Several insurers have cited uncertainty over the payments when hiking premiums for 2018 or exiting insurance markets altogether. (Reporting by Michael Erman; Editing by Frances Kerry)